The No-Brainer Portfolio by William Bernstein is a simple and straightforward approach to asset, region, and factor diversification that accomplishes all three in just four assets.
Home Country
Portfolio Charts is able to translate portfolio information to the local currency, inflation, and available funds of many different countries. Choose the home country where you live, and it will update every section of the page.
Asset Allocation
How to build a No-Brainer Portfolio
| % | Asset Class |
|---|---|
| 25% | United States Large Cap Blend Stocks |
| 25% | United States Small Cap Blend Stocks |
| 25% | Developed ex-US Small Cap Blend Stocks |
| 25% | United States Short Term Treasury Bonds |
Other Versions
While they’re not all direct iterations of the No-Brainer Portfolio, Bernstein talks about all types of asset allocations in his writings. Here are just a few examples, and you can also model any version you like using the Charts.
Four Pillars Medium — Expanding the No-Brainer into value factors and real estate
Coward’s Portfolio — A modest proposal for a naive allocation that beats the experts
Sheltered Sam 60-40 — A unique portfolio designed for a specific investing persona
Author
William Bernstein
William Bernstein is a neurologist and financial author who writes prolifically on asset allocation. You can read his thoughts on the No-Brainer Portfolio in his book The Intelligent Asset Allocator.
Overview
The No-Brainer Portfolio, also sometimes called the Simpleton’s Portfolio, is an interesting study in asset allocation. Bernstein is a self-described “asset junkie” who enjoys discussing all types of increasingly sophisticated portfolios custom designed for unique investor needs and fine-tuned with advanced concepts like efficient frontiers. While the No-Brainer Portfolio is just the simplest introductory idea in The Intelligent Asset Allocator, I also think it uniquely expresses some of his most fundamental insights.
Bernstein tends to talk about his ideas self-deprecatingly in terms of naive but effective diversification, but the thing I find most interesting is how the No-Brainer Portfolio tackles three different types of diversification in the most efficient way possible. By adding small cap stocks, international stocks, and short term bonds to a traditional large cap stock fund, it demonstrates how easy it is to construct a well-considered asset allocation that doesn’t depend so much on the handful of large cap companies that tend to dominate stock returns. For a lot of people looking for maximum diversification with minimum effort, that really is a no-brainer.
Performance
Since 1970, an investor in the United States holding the No-Brainer Portfolio earned an average 6.9% real return, with a baseline CAGR of 4.8% over 15 years. It supported a 5.1% safe withdrawal rate for 30 years and 4.5% indefinitely. Its worst peak-to-trough loss was 41%, and the longest a new investment spent below water was under 10 years.
No-Brainer Portfolio Performance
| # | Metric | What it measures |
|---|---|---|
| 6.9% | Average return | Mean annual return after inflation |
| 4.8% | Baseline real return (15 years) | What 15-year stretches returned in the weaker outcomes |
| 5.1% | Safe withdrawal rate (30 years) | Highest spending rate that lasted 30 years in the worst case |
| 4.5% | Long-term withdrawal rate | The SWR floor over very long retirements |
| 41% | Deepest drawdown | Worst peak-to-trough loss after inflation |
| 10 years | Longest drawdown | Longest a new investment stayed below what you put in |
| 13.3% | Volatility (standard deviation) | Year-to-year variation in returns |
All home countries
| Home country | Average | Baseline | SWR | LTWR | Deepest | Longest | Volatility |
|---|---|---|---|---|---|---|---|
| Australia | 5.8% | 4.2% | 3.6% | 3.0% | 52% | 14 years | 13.8% |
| Canada | 6.2% | 4.3% | 4.8% | 4.0% | 35% | 9 years | 11.3% |
| France | 7.2% | 5.3% | 4.5% | 4.0% | 45% | 13 years | 14.9% |
| Germany | 6.9% | 5.3% | 4.2% | 3.7% | 49% | 13 years | 15.7% |
| Italy | 7.1% | 4.9% | 5.0% | 4.2% | 38% | 10 years | 14.8% |
| Japan | 6.1% | 1.5% | 3.1% | 2.4% | 45% | 23 years | 16.5% |
| Netherlands | 6.7% | 4.8% | 3.9% | 3.5% | 52% | 13 years | 15.7% |
| Spain | 6.4% | 4.5% | 3.8% | 3.2% | 51% | 13 years | 16.1% |
| Sweden | 7.8% | 5.9% | 4.7% | 4.3% | 45% | 12 years | 15.2% |
| Switzerland | 6.2% | 3.9% | 3.4% | 2.9% | 58% | 14 years | 17.3% |
| United Kingdom | 6.7% | 5.6% | 4.5% | 4.0% | 40% | 13 years | 13.9% |
| United States | 6.9% | 4.8% | 5.1% | 4.5% | 41% | 10 years | 13.3% |
Charts
Different ways to visualize the No-Brainer Portfolio
Comparisons
How the No-Brainer Portfolio compares to other options
Alternatives
Portfolios with a similar structure or design intent
Permanent Portfolio — Another 4-asset approach that focuses on diversification
Ideal Index Portfolio — Similar portfolio structure showcasing value and growth tilts
Core Four Portfolio — Similar percentage of stocks with REITs instead of small caps
Articles
Insights that mention the No-Brainer Portfolio
Discussion
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